Simple Methods to Prioritise your Debt Repayments

by Fox Symes on October 14, 2013

Do you feel like you’re always back-stroking through a pool of debt, never reaching the wall or finding the opportunity to turn-around? Life has become a big, one way race; the beginning is a memory of hope and determination, but now your enthusiasm is flagging, it’s too much, too far and loneliness threatens to completely undo you mid-stroke. You aren’t alone. The race against debt can be your victory if you take the time to swim over to the side, hold onto the wall and take stock of the current situation. What debt is pulverising your repayment schedule? How do you dig yourself out of this one-person race?

Red Priorities

Identifying Red Priorities (Emergency), Orange Priorities (High) and Yellow Priorities (Moderate) is somewhat challenging when a tide of bills threaten to sweep away much of your income, let alone your concentration; after you’ve taken care of business, sort out what needs to be paid first. Red priorities normally refer to consequence driven charges, that if not paid, will adversely affect your life – think home loans or rent payments; bankruptcy; utilities – imagine how difficult it will be to live without power in the depths of winter or a searing summer; or overdue statements from debt collectors, summoning you to court. These must be paid first. As long as you’re meeting minimum repayments on other cards, your focus is clearing these game-changers before you’re swept into a different, murkier pool entirely. Keep financial institutions and lending agencies up to date with your situation – there may be a payment scheme available to struggling people just like you.

Orange Priorities

The flames of an orange priority aren’t as hot, though letting these get out of control will ensure a new way to get burned. Credit cards, overdrafts, personal loans or money borrowed from your nearest and dearest are serious debts, though not life threatening. The very last option is often negotiable, work with your family to manage their expectations and your own, keeping them in the loop as your mega-pool of debt shrinks. Which one should you pay first? Chase the account with the highest interest rate and pay the absolute maximum you can afford without breaking your legs for the rest of the month. It may be painful, but you’ll knock out the debt while accumulating less interest; good news, as you can then move onto other concerns.

Yellow Priorities

Finally, we come to the kiddy pool of finances. Think overdue library books, video charges, store credit charges and debts with an interest-free long term repayment clause; not that being a good community member is unimportant, but in an ocean of debt, the shallow end of a tiny tide pool is the least of your worries. Try to drop a few dollars here and there every month and these miniscule debts will disappear quickly and quietly.
Repaying debt doesn’t have to be an absolute nightmare; it will be hard, it will hurt and you may need to make sacrifices, but you CAN do it. Avoid taking out another loan or credit card to cover existing debts and the pool should dissipate soon enough.